When do US sanctions on Iran move a share price?
ZTE, 2016: US export ban
Short answer: the warning came four years early, in the press. The shares didn’t react until the US acted.
What happened
- The action: on 2016-03-07 the US Commerce Department added ZTE and three related companies to its Entity List, which bars US suppliers from selling to them without a licence (Federal Register notice). ZTE built its phones and network equipment with US chips.
- Why: sales of equipment containing US parts to Iran.
- Trading halt: ZTE’s Hong Kong shares were suspended from 2016-03-07 to 2016-04-06. The “after” figures start from the first day of trading after the halt.
Warning signs before the action
- 2012-03-22, Reuters: reported that ZTE had sold Iran’s main telecom company, TCI, a surveillance system able to monitor phone and internet traffic. It was part of a EUR 98.6M contract signed in December 2010 (saved copy).
- ZTE’s own filings: not checked. We did not search ZTE’s Hong Kong announcements from 2012-2016 for Iran.
Share price before and after
- Before the action (against the local index): −8.7% over 60 trading days, +0.4% over 20, +4.9% over 5.
- After: −10.8% after 1 trading day, −19.6% after 5, −18.6% after 20.
What this shows
- The evidence was public for four years. The shares fell 9% against the index in the three months before the ban but were flat in the last month. The big fall came only after the ban.
How we measured
- Share move: the company’s share price change minus the local index change, from daily closing prices (Yahoo Finance).
- Before: from the close 60, 20 and 5 trading days before the action, up to the last close before it.
- After: from that last close to 1, 5 and 20 trading days later.
- Data and code: case_study_summary.csv, case_study_price_paths.csv, scripts/case_studies.py.
- Saved sources: receipts/case-studies.